Growth of Petroleum Use

Although for centuries petroleum (also known as crude oil) had been used in small quantities for purposes as diverse as medicine and ship caulking, the modern petroleum era began when a commercial well was brought into production in Pennsylvania in 1859.

The oil industry in the United States expanded rapidly as refineries sprang up to make oil products from crude oil. The oil companies soon began exporting their principal product, kerosene—used for lighting—to all areas of the world.

The development of the internal-combustion engine and the automobile at the end of the 19th century created a vast new market for another major product, gasoline. A third major product, heavy oil, began to replace coal in some energy markets after World War II.

The major oil companies, which are based principally in the United States, initially found large oil supplies in the United States. As a result, oil companies from other countries—especially Britain, the Netherlands, and France—began to search for oil in many parts of the world, especially the Middle East.

The British brought the first field there (in Iran) into production just before World War I (1914-1918). During World War I, the U.S. oil industry produced two-thirds of the world’s oil supply from domestic sources and imported another one-sixth from Mexico.

At the end of the war and before the discovery of the productive East Texas fields in 1930, however, the United States, with its reserves strained by the war, became a net oil importer for a few years.

During the next three decades, with occasional federal support, the U.S. oil companies were enormously successful in expanding in the rest of the world. By 1955 the five major U.S. oil companies produced two-thirds of the oil for the world oil market (not including North America and the Soviet bloc).

Two British-based companies produced almost one-third of the world’s oil supply, and the French produced a mere one-fiftieth. The next 15 years were a period of serenity for energy supplies.

The seven major U.S. and British oil companies provided the world with increasing quantities of cheap oil. The world price was about a dollar a barrel, and during this time the United States was largely self-sufficient, with its imports limited by a quota.